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Small Floor in the Making

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Good morning,

Wow, myself and every hedge fund never saw this week coming.  I am still perplexed by the last week in crude oil trading.  Traders are now negative for the year on long crude oil trades.  This week hedge fund managers removed all money from forward crude positions and dumped them into natural gas.  Natural gas is seeing record price increases due to low inventory levels, high exports, and low production.  Natural gas is shaping up to be nasty in price and supply this winter, much like propane in 2014.  WTI Crude prices found a bit of support at $56/barrel after falling through the $57/barrel support price.  OPEC, mainly Saudi Arabia is trying as hard as they can to convince traders that they are going to cut production.  This week they announced cutting shipments but not production, but yesterday they finally announced that they are looking to cut 1.4M barrels/day in 2019.  They are looking to drum up support for the upcoming December OPEC meeting.  The IEA is also being very bizarre in their predictions as well.  They continue to say that 2019 shows a slowing economy and world demand, but then turns around and says the world needs another 10M, yes 10M, barrel/day production in the next five years?!  Basically, you can take it or leave it with the IEA announcements at this point.  There is not much predictability in their news.  For now, we can enjoy low gas and diesel prices going into Thanksgiving and wait and see what OPEC does in December.  At the end of the day, I still can’t believe crude prices fell this far so fast.  I expect the pendulum to swing back up closer to WTI $60/barrel in December.  But for now, sit back and relax.

Local retail prices on gasoline have finally broke through $2.49/gallon.  I expect the price at the pump to continue on the downward trend.  Diesel retail prices are even getting close to $2.99/gallon.  We might see $2.99/gallon diesel in the next week, especially with some farm demand starting to dry up in the Midwest.

Propane prices are slowly breaking away from the crude trade and starting to rise.  We are experiencing colder than normal temps and expecting the cold to continue into December.  Regardless of what NOAA is saying, the weather prediction services that I subscribe to are calling for a potential Polar Vortex showing in December.  I should know more next week.  For now, if you are a will-call customer, please keep a close eye on your tank as most users are going through more than normal this month.  Heating demand is already up over 20% for the season!

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford – Pres.

Catch A Falling Knife?

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Good morning,

President Trump’s plan to keep crude prices low for midterm elections worked perfectly.  He convinced Saudi Arabia and Russia to pump more oil to make up for the sanctions being put on Iran which started on November 1st.  Leading up to November 1st, crude prices started to relax as world demand and possible surplus crude supplies from the US were in question.  Then to put the icing on the cake to insure that prices stayed low, President Trump on November 1st granted eight waivers to countries allowing them to buy Iranian crude.  This action sent prices falling even further.  Now Saudi Arabia, Russia, and the rest of OPEC are very upset.  OPEC countries are mad at Saudi Arabia and Russia for trying to help the U.S. with the Iran sanctions which put prices at risk.  And Saudi Arabi is furious at the U.S. for granting the waivers putting crude supplies into possible greater surplus.  Regardless, lower prices will be here for a little while until the OPEC meeting during the first part of December.  I  expect OPEC to announce supply cuts.  The U.S. made too many moves to help the elections and I fear retaliation.  So for now, enjoy the cheaper prices.  But I wouldn’t hold out that these current prices stay through Christmas.

Local retail prices on gasoline continue to inch down closer to $2.49/gallon.  With the latest price drops, I wouldn’t be surprised if we see $2.49/gallon on gasoline this weekend or early next week.  Diesel prices continue to remain higher now that winter additives are in the price as well increased demand for harvest.  I don’t expect to see too much movement on diesel prices.

Propane prices continue to remain calm.  As I have been saying for months, once we have a demand event or crude turns around, hold on.  Propane is still setup for a nice price jump at some point this season.  If you are a will-call customer, I highly recommend that you fill your tank now.  In addition, if you monitor your own tank levels, please make sure to call us when you are around 30% to give us sufficient time to complete your delivery during the winter months.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford

 

Crude Oil: How Low Will We Go?

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Good afternoon,

After heavy selling last week, crude oil prices continue to slide this week.  WTI crude prices are set to close below $65/barrel.  On technical charts this puts us into correction and possibly a bear market.  However, I try not to just watch the charts but also the hard data.  The global market is very tight on supply.  Any disruption puts the world supply back into deficit.  The Iran sanctions have just begun.  And right now traders are banking on Saudi Arabia playing nice due to the political fallout from killing a journalist.  I am skeptical at seeing these prices hold much longer.  I am still anticipating a return in WTI prices closer to $70/barrel.  I expect that China and the US will continue to make progress on trade and that the global slowdown being discussed will not come into fruition.

In local retail news, retail prices of gasoline continue to drop closer to the $2.49/gallon threshold.  The economics are not quite there, but they will be soon if the sell off continues.  Diesel prices have continued to remain more stable due to the increased demand for harvest during this time.  In addition, winter blends are starting to be implemented adding anywhere from 3-15 cents/gallon to the cost depending on the additive treatment and blend ratio with #1 ULSD.

Propane prices are remaining stable as we go into winter.  I am still surprised by the inventory numbers released on a weekly basis.  I believe that with a large demand event, propane prices will spike quickly.  All eyes are on the weather forecast which continues to turn more towards a colder winter now than a month ago.  Stay tuned.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford – Pres.

Crude Prices Continues to Slide

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Good morning,

Crude oil prices continue to slide this week.  WTI crude touched $66/barrel on Tuesday, closing over 11% down in the past two weeks.  Traders have all rung the register and jumped on board believing that Saudi Arabia will make sure that all Iranian crude lost from sanctions will be replaced.  Many feel that Saudi Arabia will deliver on the promise to help diminish consequences over the killing of a journalist.  In addition to the geopolitical climate changes, the world stock markets have been in correction giving strength to a potential slowdown in the economy which is bearish for crude.  I do not feel that crude prices will go much lower.  I feel that at this point the hedge fund money is out of the price.  When you look at the amount of contract positions sold in the past two weeks, the amount purchased in return is minimal.  Therefore, traders are not selling their long positions and shorting crude.  So basically, from a technical standpoint, crude prices are in a “wait and see” pattern until the hedge fund managers enter the market again.

Local prices of gasoline are inching closer to $2.49/gallon.  I expect to see prices continue to fall throughout the weekend.  Diesel prices have not fallen as much due to increased demand for harvest.  Although harvest is going to be very prolonged this year due to the flooding and temperatures, I don’t expect to experience any diesel supply disruptions over the coming weeks.

Propane prices are slowly rising as we get into winter.  The colder than normal October has increased demand.  The major sell off in crude affected propane slightly, but overall, prices are continuing to trend higher.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford – Pres.

WTI Crude Falls Below $70/Barrel

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Good morning,

For the first time in weeks, WTI crude price dropped below $70/barrel.  As I have been discussing, there are reasons to believe crude prices could go higher, and also reasons for prices to drop.  Over the past weeks, the reasons for crude to climb (healthy demand, supply tightness, Iran sanctions, political instability in the Middle East) were winning the discussion and the bull market took off.  Once hedge fund positions took a record long position on crude, I took pause.  I was in agreement on the runup in price because emotions had clearly taken over the market.  And then, just like that, profit taking took over.  Announcements came out that Saudi Arabia and Russia were looking at secret production increases to offset Iran sanctions, the FED announced that it’s ready to keep going on rate increases, China’s economy showed headwinds, hurricanes eroded demand and supply surplus came back in the US, refinery maintenance moved closer to completion, and the hedge funds started to ring the register.  Within a week, $7/barrel came off of WTI and refined products started to relax in price.  I am cautious about any further downward movement considering the political instability in Saudi Arabia.  All eyes are on deck surrounding the international situation with the disappearance of Jamal Khashoggi.

In local news, gasoline retail prices started to relax a bit.  We are moving back down closer to $2.50/gallon.  Time will tell, but for now, the big upswing in price is on hold.  Diesel prices might come down a touch, but diesel cost has not dropped as much as gasoline.

Propane prices are holding a bit of a flat pattern after running up last week.  The supply situation seems to be a little bit stronger, but the weather forecast is looking like a potential for a 10% colder winter compared to last year.  This would be a dramatic increase in demand.  So for now, it’s wait and see.  I still am calling for propane prices to rise in the coming months, and it’s not too late to lock in your prices for this winter.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford – Pres.

Correction Hits the Crude Market

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Good morning,

The crude markets went into correction last week and gave back almost $6/barrel.  In addition, refinery maintenance in Chicago started to finish up causing winter RVP to flow into the cash price point in Chicago on gasoline.  Saudi Arabia and Russia keep hinting at a private side deal to secretly raise output starting in November.  The IEA also lowered their demand forecast for 2019.  And hurricane Michael destroyed demand down south, including most of the infrastructure along the panhandle in Florida.  Also, in a surprise, President Trump is discussing variances for purchases of Iranian crude for countries that tried to curb purchases in the past months.  And last but not least, economic downturn in China and the U.S. due to trade wars overtook the airwaves for a few days as well.  All of these events caused a major downturn in crude prices.  The main event going into this week is the political tension between Saudi Arabia and the rest of the world surrounding the disappearing journalist.  Any major announcement of sanctions could cause a spark for retaliation which in turn could make crude prices soar.  All eyes are on deck.

In local news, retail prices for gasoline and diesel are starting to slowly come down.  I would expect prices to slowly ease depending on what happens this week.

Propane prices climbed in the past week due to an increase in demand and potential supply tightness going into winter.  In addition, corn drying is in full swing.  We expect propane prices to continue to climb going into winter unless crude prices collapse.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford – Pres.

Crude Prices Have A Fever of $100/Barrel

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Good morning,

As you may have noticed, the price of fuel has been rising at the pump.  As the sanctions against Iran are getting closer to kicking in, traders have caught a nasty fever.  The fever of the magical $100/barrel crude price is on and traders are putting their money where their mouth is.  Right now, the net long positions on crude oil futures hit historic levels again.  This week OPEC and Russia reminded the world that the Iran sanctions were put in place by the U.S., not them.  Therefore, they are a bit reluctant to come out and rescue the world from higher prices.  However, many believe that Russia and Saudi Arabia are secretly putting more oil into the market leading up to the Iran sanctions in November.  Under the current market conditions with the Iran sanctions coming, I do believe that Brent prices could touch $100/barrel in the coming months.  But I’m also a huge fan of history.  Every time we see this amount of hedge fund money pour into crude at a frantic pace, a correction is around the corner.  And in recent years, the correction comes sooner than later.  I believe that by the end of November, there is a potential for prices to unwind, especially by year end as traders take profits on the tax breaks based for this year.  Unfortunately, this means that high prices at the pump are probably here for at least two more months.

Retail prices on gasoline and diesel are climbing not only due to the rise in crude prices, but also because of refinery maintenance at facilities in the Midwest causing supply constraints.  I believe that gas prices will stay under $3/gallon and diesel prices under $3.49/gallon for a bit here.  But if the $100/barrel fever doesn’t break in the coming weeks, at the end of the month we could see gas prices breaking $3/gallon and diesel climbing over $3.49/gallon.

Propane prices continue to baffle me.  Inventories across the country are at the same level as last year.  But the cost ratio of propane to crude oil is low.  Corn drying demand is low and much of the tobacco crop was destroyed out east.  So for now, propane prices will remain stable, but any demand event could cause a large spike in price.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford – Pres.

Quick Update

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Good afternoon,

I’m sorry to bring bad news on prices going into the weekend.  Prices are continuing to dramatically climb due to a rise in crude oil prices.  The rise is being blamed on upcoming Iran sanctions going into affect the first week in November which has the potential to cause a global deficit in crude supplies.  In addition, there are major issues with refinery and pipeline maintenance in the Midwest.  Prices for diesel and gasoline are in a 15 cent spread at most terminals throughout the state.  In addition, the only pipeline bringing product into Madison will be down for 10 days in October.  I expect to see retail prices at the pump continue to climb for both gasoline and diesel.  The high prices will remain until the maintenance season is over in mid-October.

The timing is awful with farmers starting to harvest.  If demand picks up we could see differential price blow outs push this dramatically higher.  The cold temps are also ticking up propane demand which is set for a price jump as well.

Unless crude oil drops $5-10/barrel, I would expect to see current prices on all refined products to stay high for another 3-4 weeks.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

 

Jon Crawford – Pres.

 

Hurricane and Record Production

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Good morning,

Another wild week in the crude trade.  We started the week with Hurricane Florence coming to the U.S.  The potential threat to East Coast pipelines and shipments caused a nice upward bump in the price of WTI.  Then on Wednesday the EIA reported a large drop in crude inventories but a massive build in all refined products.  Traders digested data and crude prices started to move sideways.  The drums have been beating for weeks that the market is tight and that the loss of Iran and Venezuela crude is putting upward pressure on crude prices.  But on Thursday, the IEA and the U.S. reported news that in August, the world produced a RECORD amount of crude, even with the losses from Iran and Venezuela!  In addition, the U.S. overtook both Saudi Arabia and Russia to become the world’s number one producer of crude oil at over 11 million barrels per day!  The news caused crude prices to drop like a rock sending refined product prices back to the level before the hurricane was reported on Monday.  Wild ride…  So for now, we are holding on Friday waiting to see how Hurricane Florence plays out.  I am still a bit bullish on crude going into the end of year, and I’m not convinced that won’t see some refinery maintenance issues in the Midwest causing some local price spikes during the fall harvest.  More to come.

In local news, gasoline and diesel prices have been pretty stable around the $2.76/gallon on gasoline and $3.09/gallon on diesel.  With the market making big moves both ways, we are still maintaining an average that will probably continue to hold these prices at the pumps.

Propane continues to baffle me.  Prices have remained fairly calm.  With national inventories below the five year average coupled with mother nature’s history so far this year, I’m worried that any jump in propane demand is going to cause a major price spike.  I continue to encourage everyone to lock in their propane prices for this winter and fill their tanks now to ensure being full before the temperature changes.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford

Price Peak For Now – Flooding Not Over

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Good morning everyone,

We continue to monitor flooding in our area and wish everyone’s safety over the next few days.  If you need any help, please feel free to contact us.  If any propane tanks or refined fuel tanks have been affected, please reach out to us immediately to ensure your safety.  Hopefully the dry forecast for the next week is accurate and waters can start to recede.

Crude oil prices continue to be under pressure from the trade war with China and now a possible trade war with Japan.  The strength of the dollar is putting a cap on upward movement in WTI crude prices.  I am surprised by the current downward trend due to drop in inventories.  There are a lot of eyes on world demand and potential slow down in China and India’s economies.  However, China and India have made it clear that they will not comply with sanctions on Iran and will continue purchasing crude.  So the summer of “chaos and excitement” in the crude oil market is going to continue into fall.  I am still bullish on crude prices.  Within OPEC, the largest driver of price, Saudi Arabia, does not want to see prices go much lower.  And they have shown over the last two months that they will do whatever is necessary to keep WTI crude above $65/barrel.  For now, enjoy a little dip in price, but I’m not seeing this trend last until the end of the year.

In local retail news, prices are fairly stable.  I expect to see retail prices on gasoline and diesel hold over the weekend into next week.  With harvest and refinery maintenance coming up, we could experience some local price spikes in the coming months.  Stay tuned for more info.

Propane rack prices have leveled off for now.  However, future prices for this season have continued to blow out into larger than normal spreads.  I highly recommend that everyone lock in their propane prices.  There is a major gap in price between Midwest and Gulf Coast propane.  Supplies are under the five year mark, and a “colder than average” winter is being called.  Right now the propane market is showing cards for a potential price spike this winter.  January through March of 2019 could be very ugly.  Please call our office today and lock in your price for the coming heating season.

As always, if you have any questions, comments, or concerns, please feel free to give us a call.

Best regards,

Jon Crawford